Making donations to a cause you feel strongly about can help you to make the world a better place. Even if you do not have the time to volunteer, simply making a monetary donation can go a long way in helping NGOs to operate and positively impact those they help. Doing so may even allow you to enjoy tax benefits.
Tax Exemption on Donations under Section 80G
Before making a donation to any charity or NGO, you must check whether it is registered and validated with the Income Tax Department and provide donors with the necessary 80G receipts that the government requires. These receipts would be needed to claim deductions for donations made to the NGO. You must also have a good understanding of the 80G donation limitbefore making your donation. Learning these details would help you to effectively save on your taxes while also helping people in need.
Basically, Section 80G of the Indian Income Tax Act allows a tax deduction for contributions to specific relief funds, NGOs and charitable institutions. The key purpose of this section is to encourage people to contribute towards charitable causes and support their initiatives. These initiatives can be pretty varied, right from offering education to underprivileged kids to providing free artificial limbs to disabled individuals. All of such initiatives, after all, benefit society as a whole. As a taxpayer, you must provide details of your donations and the eligible amount for deduction under Section 80G while filing your income tax returns.
Here are a few important points about Section 80G deductions that you should remember:
- Donations eligible under the section 80G deduction can be made to several types of organisations. In addition to varied NGOs and charitable trusts, one may even donate to the Prime Minister’s National Relief Fund to enjoy tax exemption.
- The 80G deduction limit or the deduction allowed on your donation would rely on the category the recipient organisation falls under. You can typically avail:
- 100% deduction without any limit
- 50% deduction without limit
- 100% or 50% deduction subject to specific limits
- Cash donations made above INR 2000 to any NGO or charity will not be eligible for deduction under Section 80G.
- If you want to make donations above INR 2000, it should be made through modes other than cash to claim the deduction. These modes might be a cheque or demand draft. Today most NGOs and charities allow for online donations.
- As a donor, you must obtain a receipt from the approved NGO to claim the deduction while filing your income tax return.
- Donations made in kind (non-cash contributions) cannot be deducted under 80G.
Who can Claim an 80G Deduction?
If you have to pay taxes in India, you will automatically be eligible to claim a tax deduction under Section 80G. Depending on your specific circumstances, you may claim a deduction as:
- Individuals
- Companies
- Firms
- Hindu Undivided Firm (HUF)
- Non-Resident Indian (NRI)
How can we claim the deduction under Section 80G?
You must submit the following details in your income tax return to claim tax deduction under Section 80G:
- Your name
- Name of the NGO you have donated to
- Address of the NGO
- The PAN of the NGO
- Amount of contribution – the breakup of contribution in cash and another mode
- The sum of money eligible for deduction
The above details need to be mentioned in the respective tables given in the Income Tax Return.
- Table A: Donations that are entitled to 100% deduction without qualifying limit
- Table B: Donations that are entitled to a 50% deduction without a qualifying limit
- Table C: Donations that are entitled to 100% deduction subject to qualifying limit
- Table D: Donations that are entitled to a 50% deduction subject to the qualifying limit
To claim a Section 80G deduction, you also would have to submit the following documents in order to support the claim:
- Receipt: You mandatorily must have a duly stamped receipt that has been issued by the NGO receiving your donation. This receipt must include vital details like the NGO.
- Form 58: You shall require this form for donations that are eligible for a 100% deduction.
- The registration number of the trust: All eligible NGOs are provided with a registration number by the Income Tax Department. As a donor, you must see to it that this number is mentioned on the receipt of your donation. This registration number should be valid on the date on which the donation was made.
Wrapping up
Section 80G of the Income Tax Act can significantly help you lower your taxable income while also giving back to society. You simply have to donate to eligible organisations in order to not only contribute to the betterment of society but also take advantage of an advantageous tax incentive. There are several eligible NGOs across India whom you can donate to. These NGOs may focus on child education, provide free artificial limbs to the disabled, offer skill development training to the underprivileged and more.
